State economists Mark McMullen and Josh Lehner addressed Oregon lawmakers on Wednesday, delivering a cautious economic and revenue forecast. McMullen, presenting his final forecast before stepping down, indicated that despite potential financial turbulence, another “kicker” tax refund might be on the horizon.
Less than a year after passing a two-year budget, state economists suggest they may have underestimated revenue collections. McMullen informed lawmakers that Oregon could potentially send $582 million back to taxpayers in 2026, marking the sixth consecutive kicker refund. This unique law refunds income tax payments exceeding budgeted amounts by at least 2%. The state Office of Economic Analysis described the likelihood of another kicker as a “50-50 proposition.”
In addition to the personal income tax kicker, a separate corporate tax kicker is set to allocate $588 million to K-12 schools in the next budget. The latest forecast revealed that both corporate and personal income tax payments have surpassed previous assumptions. McMullen now expects an additional $532 million in general fund revenue compared to February’s predictions.
When combined with lottery revenues, economists predict Oregon will generate $1.7 billion more in the current two-year budget cycle than initially expected. However, McMullen cautioned that high interest rates intended to curb inflation could either lead to a “soft landing” or trigger an economic downturn.
Economic Indicators and Legislative Reactions
McMullen noted that many leading economic indicators have shown signs of recession, despite no official downturn. Stagnant population growth, slow job growth, and a loss of manufacturing jobs could pose challenges for Oregon. Nevertheless, rising wages and a high employment rate among working-age residents suggest steady growth in tax revenues.
Governor Tina Kotek expressed optimism, highlighting stable economic conditions and prudent budgeting. House Speaker Julie Fahey echoed this sentiment, emphasizing the state’s ability to fund critical programs. However, Senate President Rob Wagner warned of potential challenges in maintaining essential services.
Republican leaders used the forecast to criticize what they see as excessive spending by Democrats. Senate Minority Leader Daniel Bonham called for fiscal restraint, while House Minority Leader Jeff Helfrich welcomed the prospect of another kicker refund as relief for families struggling with inflation.
Wednesday’s meeting marked McMullen’s final revenue forecast presentation after over a dozen years as state economist. He will be joining the Common Sense Institute Oregon, a business-oriented research group. Reflecting on his tenure, McMullen acknowledged the high-pressure nature of the role and expressed mixed feelings about leaving.
“I’ll miss being here,” he said. “Kinda.”
